Did the IRS believe its own tax calculation that it presented to the
Jury?
Brian Ellefsen amended  his personal taxes and paid the tax liability that were in question over a year prior to his
indictment.

Brian Ellefsen's amended returns were not only accepted by the IRS they were also assessed.  The Prosecutor
Steven Mohlhenrich told the Judge that were not assessed.
(see Withheld Evidence)

Brian Ellefsen's amended returns were recalculated based on the fact that the monies that went to the trust were
really salary/wages to him.  Southwest Missouri Bone and Joint, Inc. is a Personal Service Corporation so the
income generated off this corporation is directly from Brian Ellefsen's personal services. In other words that would
be considered earned income to Brian Ellefsen.

Trial Transcript:

Sharon Vandenberg – IRS Agent (Summary Witness)
Q. And what kind of a corporation is this?

A. It is a Schedule C corporation, or a C corporation,
which is a personal service corporation, because
the
income generated off of this corporation is directly from
his personal services.
(pg 11 of PDF)
Sharon Vandenberg went on to testify that when she recalculated the taxes she collapsed the trust and took the
monies that went to the trust and made them dividends from Southwest Missouri Bone and Joint, Inc. to Brian
Ellefsen.  This calculation doubles the taxes.  Dividends are not deductible at the corporate level and are taxed at
the individual level. Dividends are not earned income and are not subject to Social Security and Medicare Tax.

Salary/Wages are deductible at the corporate level and subject to Social Security and Medicare Tax.

Mike Hopfinger, CPA explains in great detail per IRS rules and regulations why the tax calculation should be
based on earned income not dividends in his declaration.
(PDF)

  "The “dividend theory” as used by the government in this case assigning
   unearned income to Brian Ellefsen is completely void of regulatory support:..."

Rick West was the original IRS Agent.  He put in approximately 377 hours of work on the case.
(see pgs  42- 48 of
PDF)  The majority of his work was lost or misplaced by the IRS.  There were a couple of documents that the
defense received two days before trial.  They were part of the withheld documents from the FOIA request.
(see Withheld Evidence)  The defense was not able to get them into evidence.

Below are statements from those documents:
(attachment to IRS Form 10498-B)
Revenue Agent also believes that proper accounting for
the income, and
resulting examination changes, would
result in “zero tax”on the trust, and income taxable as
salary/wages to subject
. (Revenue Agent is Rick West)   
(subject is Brian Eleen)
(see pgs 38-41 of PDF)

(Block 7 IRS Form 2792: Describe basis or method used for
the computation of the fraud adjustments.)
The tax computation assumes that the
director fees paid
to Southwest MO Bone and Joint Trust is actually
Reportable by Dr. Eleen as W-2 wages
. These computations
do not address any personal expense written off on the
other trusts identified earlier.
(see pg 34 of PDF)
One of the things that was not lost in Rick West file was an IRS document entitled Abusive Foreign Trust.  It was a
document by: John Wagner, PA District Trust Coordinator.  In that document it states:
Assignment of Income:  The courts have long held that
income is taxable to the person who earns it.
 Income
cannot be assigned, without adequate compensation, to a
third party for avoidance of tax.  While the trust as a
whole my be valid, some trusts may provide for the
grantor to provide services for the trust for wages or
fees substantially below the amount previously netted
from the sole proprietorship or corporation. The trust
may them pay personal expenses for the grantor.  
Assigned
income is taxed to the one who earns it.
(see pg 23 of PDF)
As you can see there is a conflict.  IRS agent Sharon Vandenberg is trying to change the character of the
Income.  She is trying to change earned income, income generated by Dr. Brian Ellefsen's work, to
unearned income.  In doing so one has to question if the IRS is breaking their own rules.  Earned Income
is subject to employment tax, unearned income is not. If an individual tries to change the character of
their income they are breaking the law.

IRS agent Rick West on the other hand did not change the character of the income.  Dr. Ellefsen  
amended his tax returns the same way IRS agent Rick West did his tax computations. The Jury never
heard any of this.

• Multiple Entities Do Not Change The Character Of Income
Generally the "character" and "source" of income are not changed by shifting income
items through one or more additional entities (domestic or foreign).
For example:

1. If a foreign trust is not treated as a grantor trust, distribution of its income is
taxable to U.S. beneficiaries when made. Distributions of trust corpus are not
taxable. IRC § 652 (simple trusts) and IRC § 662 (complex trusts) specify that
distributions have the same character in the hands of the  beneficiaries that the
income had in the hands of the trustee.

2. A capital gain from a U.S. partnership remains a capital gain in the hands of the
partners to that U.S. partnership, and to any persons receiving the income in
additional tiers below the initial recipient.
(see pg 2 of PDF)